Wage subsidies available for employers

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Update for July 17, 2020
The government has announced the Canada Emergency Wage Subsidy will be extended to December 2020, along with significant updates to the program. We’ll update this blog post as the details are finalized.

The government has announced two separate wage subsidies: The 10% Temporary Wage Subsidy and the 75% Canada Emergency Wage Subsidy.

The big difference – apart from how much subsidy you get – is the 75% Subsidy requires a significant decrease in revenue, whereas the 10% Subsidy doesn’t have this requirement.

You would only apply for one benefit. If you received a benefit from the 10% Subsidy, that reduces dollar-for-dollar your benefit under the 75% Subsidy.

The key point is that you’d apply for the 75% Subsidy, unless your revenue hasn’t significantly decreased in which case you’d apply for the 10% Subsidy. 

Who qualifies?

For the 10% Subsidy, here’s who qualifies:

  • Sole proprietorships, partnerships and most corporations

  • You had a payroll account with the CRA on March 18, 2020

  • You have employees

    • For sole proprietorships and partnerships, you don’t count as an employee

    • For incorporated professionals, you can be an employee of your corporation

 For the 75% Subsidy:

  • Same criteria as above (you had to have had a payroll account with the CRA on March 15), plus

  • Your revenue decreased by 30% because of COVID-19 (15% for March)

(Updated Apr 8)
To calculate the revenue decrease, you compare your monthly revenue year-over-year. You also have the option of comparing it to your average revenue of Jan-Feb 2020, which is a one-time option you must decide on when you first apply for the subsidy. Basically, you’ll apply up to three times, and each time you compare your most recent month’s revenue to the same month last year or to Jan-Feb 2020.
Tip: If your revenue has been growing significantly, it’s likely better to compare to Jan-Feb 2020.

Here’s the details:

  • For remuneration paid between March 15 to April 11: You qualify if your March 2020 revenue is 15% lower than your March 2019 revenue or your Jan-Feb 2020 revenue

  • For remuneration paid between April 12 to May 9: You qualify if your April 2020 revenue is 30% lower than your April 2019 revenue or your Jan-Feb 2020 revenue

  • For remuneration paid between May 10 to June 6: You qualify if your May 2020 revenue is 30% lower than your May 2019 revenue or your Jan-Feb 2020 revenue

  • For remuneration paid between June 7 to July 4: You qualify if your June 2020 revenue is 30% lower than your June 2019 revenue or your Jan-Feb 2020 revenue

(New Apr 11)
To give business’s more certainty, if you qualify for one period, you automatically qualify for the next. For example, if your revenue decreased by 15% in March, you qualify for the subsidy for both March and April, regardless of your April revenue.

In calculating your revenue, you have the option of using either accrual accounting (you recognize revenue as your see patients/make sales) or cash accounting (you recognize revenue as you get paid). You have to make this decision when you first apply and you can’t change it.
Tip: Cash accounting is better if you booked a lot of sales in 2020 that you don’t expect to be paid for.

How much is the subsidy?

The 10% Subsidy

The 10% Subsidy is 10% of salary, wages, bonuses and other remuneration paid to employees between March 18 and June 19, 2020. The subsidy is capped at $1,375 per employee and $25,000 per employer.

The 75% Subsidy

The 75% Subsidy is based on salary, wages, bonuses and other remuneration paid to employees between March 15 and June 6, 2020. 

(Updated Apr 8)
The way this works is you’ll receive a rebate for whatever you pay your employees, subject to the following limitations:

  • Capped at $847 per week per employee, and 75% of the employee’s baseline remuneration

    • The baseline remuneration is the average weekly pay between January 1 and March 15, excluding any 7-day periods where the employee wasn’t paid

  • If the employee isn’t at arm’s length of the company (meaning the owner of the corporation, family members, etc.), the subsidy is only available if that person was employed prior to March 15, 2020

  • For new employees, the limit is 75% of remuneration actually paid

(New Apr 8)
In addition, employers will receive a full refund for employer CPP and EI contributions for employees who are on paid leave. An employee is considered on paid leave for a given week if they’re being paid and not performing any work for the employer that week. That means if you’re continuing to pay an employee while they’re not working, you’ll receive a refund of your CPP/EI contributions.

There’s no maximum on how much each employer can claim for this subsidy.

Employers will be required to attest that they’re making their best efforts to top-up employees’ salaries to the pre-crisis levels.

Considerations for both subsidies

For sole proprietorships and partnerships: Unfortunately, payments to yourself don’t count even if you “pay yourself a salary.”

For incorporated professionals: Remuneration paid to yourself and family members in your capacity as employees qualify. Dividends don’t qualify. If you’re an associate of your corporation, fee splits don’t qualify. However, you can still pay yourself a salary in your capacity as an employee of the corporation.

The subsidy will be taxable to the employer as part of its 2020 income. This waters down the benefit a bit, but it’s still a substantial benefit.

How do I get the subsidy?

The two subsidies operate in different ways. The 10% Subsidy works by having you pay your employee, and then you reduce the amount of payroll remittances you pay – basically, you get the subsidy by paying less than you should to the CRA.

The 75% Subsidy works by having you pay your employee, and then you receive a rebate 3-6 weeks later.

The 10% Subsidy

Although there’s no form or application, calculating the subsidy Is a bit convoluted.

The amount the employee receives doesn’t change. You get the benefit of the subsidy by reducing your payroll remittances.

You have to continue remitting (paying) any CPP and EI withholdings and employer contributions. You’re allowed to reduce your income tax withholdings by the 10% Subsidy.

You can carry forward any unused subsidy to the next payroll period. At the end of the year, you can apply for a rebate of the unused amount or carry it forward to 2021.

QuickBooks and Wave have updated their apps with this feature.

The 75% Subsidy

Employers can log into their CRA My Business Account to apply for the subsidy.

(Updated Apr 8)
Concerningly, the government has announced it will be introducing a new series of offences and anti-abuse rules to prevent participants from providing false or misleading information or from misusing any funds obtained under the program. This will include a 25% penalty (in addition to having to repay the amounts) for artificially reducing revenue.

Exclusive for HBA clients: If you’re doing your payroll manually, make your life easier with our 10% Wage Subsidy Calculator. We automate all these calculations so you can focus on what matters. Sign up below!

 

Here’s an example of how the 10% wage subsidy works: